333 F.R.D. 314 (S.D.N.Y. 2019), 19-cv-5460 (JSR), Johnson v. Rausch, Sturm, Israel, Enerson & Hornik, LLP

Docket Nº:19-cv-5460 (JSR)
Citation:333 F.R.D. 314, 105 Fed.R.Serv.3d 679
Opinion Judge:JED S. RAKOFF, U.S.D.J.
Party Name:Arthur JOHNSON, on behalf of himself and all others similarly situated, Plaintiff(s), v. RAUSCH, STURM, ISRAEL, ENERSON & HORNIK, LLP; Worldwide Asset Purchasing II, LLC; Galaxy International Purchasing, LLC; Galaxy Portfolios, LLC; Galaxy Asset Purchasing, LLC; and John Does 1-25, Defendants.
Attorney:Benjamin Jarret Wolf, Joseph Karl Jones, Jones, Wolf & Kapasi, LLC, New York, NY, for Plaintiff. Arthur Jay Sanders, Law Offices of Arthur Sanders, New City, NY, Mitchell Lee Williamson, Barron & Newburger, P.C., Somerset, NJ, for Defendant.
Case Date:December 13, 2019
Court:United States District Courts, 2nd Circuit, Southern District of New York

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333 F.R.D. 314 (S.D.N.Y. 2019)

105 Fed.R.Serv.3d 679

Arthur JOHNSON, on behalf of himself and all others similarly situated, Plaintiff(s),

v.

RAUSCH, STURM, ISRAEL, ENERSON & HORNIK, LLP; Worldwide Asset Purchasing II, LLC; Galaxy International Purchasing, LLC; Galaxy Portfolios, LLC; Galaxy Asset Purchasing, LLC; and John Does 1-25, Defendants.

No. 19-cv-5460 (JSR)

United States District Court, S.D. New York

December 13, 2019

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Benjamin Jarret Wolf, Joseph Karl Jones, Jones, Wolf & Kapasi, LLC, New York, NY, for Plaintiff.

Arthur Jay Sanders, Law Offices of Arthur Sanders, New City, NY, Mitchell Lee Williamson, Barron & Newburger, P.C., Somerset, NJ, for Defendant.

OPINION AND ORDER

JED S. RAKOFF, U.S.D.J.

On June 11, 2019, plaintiff Arthur Johnson commenced this action on behalf of himself and all others similarly situated (the "Proposed Class") against Rausch, Sturm, Israel, Enerson & Hornik, LLP ("Rausch") and Worldwide Asset Purchasing II, LLC, alleging violations of § § 1692g, 1692e, 1692f of the Fair Debt Collection Practices Act ("FDCPA"). ECF No. 1. On October 23, 2019, the Court granted the parties’ joint motion to amend the complaint, by which the following additional defendants were joined: Galaxy International Purchasing, LLC, Galaxy Portfolios, LLC, and Galaxy Asset Purchasing, LLC. ECF No. 20-3. On December 2, 2019, the parties moved this Court for conditional approval of a class action settlement, certification of the conditional settlement class, and approval of the proposed class notice. ECF No. 23. On December 9, 2019, the Court held a preliminary approval fairness hearing, during which it orally denied the motion in its entirety, without prejudice. See Hearing Transcript, December 9, 2019. The Court now elaborates on the reasons for its denial, focusing on its concerns with the proposed settlement, certification, and notice, but inviting the parties to cure these concerns.

Background

In his amended complaint, Johnson alleges that a letter that he received from Defendants regarding his financial obligations violated the FDCPA, because it stated, in relevant part:

Total amount of the debt due as of the date of charge-off.............

Total amount of interest accrued on the debt after charge-off......... $3, 843.55

Total amount of non-interest charge or fees accrued after charge-off.. $.00

Total payments and credits made on the debt after charge-off.......... $4, 380.67

Balance.......... $8, 224.22

ECF No. 20-2 ("Amended Complaint"), at 20. The amended complaint alleges that this appears to falsely indicate that he has a credit balance of $537.12 in violation of 15 U.S.C. § § 1692g(a)(1), 1692e(A)(2), 1692e(10), 1692f(1). Id. During the hearing on December 9, 2019, counsel for Defendants clarified that a coding error caused (1) the amount in the first line to be blank and (2) the amount in the fourth line to be added to the amounts in the preceding three lines, rather than being subtracted from them. See Hearing Transcript, December 9, 2019.

Counsel also informed that the same programming error occurred in numerous other letters. Accordingly, the proposed settlement class is defined as: All New York consumers, residing in the State of New York, who received correspondence, June 11, 2018-June 11, 2019 from Rausch Sturm Israel Enerson & Hornik, LLC in the same format as Exhibit "A" to the Amended Complaint, seeking to collect a Debt owed to Worldwide Asset Purchasing II, LLC, Galaxy International Purchasing, LLC, Galaxy Portfolios, LLC, or Galaxy Asset Purchasing, LLC, which stated

"Total amount of the debt due as of the date of charge off...........

Total amount of interest accrued on the debt after charge off........$

Total amount of non-interest charge or fees accrued after charge off..........$

Total payments and credits made on the debt after charge off.........$

Balance.................$"

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and where the "Total payments and credits on the debt after charge off" is greater than the "Total amount of the debt due as of the date of charge off" + "Total amount of interest accrued on the debt after charge off" + "Total amount of non-interest charge or fees accrued after charge off."

ECF No. 23.

Analysis

Fed. R. Civ. P. 23(e) requires judicial approval for any class action settlement at the district court’s discretion. A class action settlement approval procedure typically occurs in two stages: (1) preliminary approval — where "prior to notice to the class, a court makes a preliminary evaluation of fairness," and (2) final approval — where "notice of a hearing is given to the class members, [and] class members and settling parties are provided the opportunity to be heard on the question of final court approval." In re Payment Card Interchange Fee and Merchant Discount Antitrust Litig., 330 F.R.D. 11, 28 (E.D.N.Y. 2019).1

The present motion concerns the preliminary approval stage. Under the new amendments to Rule 23 which took effect on December 1, 2018, a district court must consider whether the court "will likely be able to: (i) approve the proposal under Rule 23(e)(2); and (ii) certify the class for purposes of judgment on the proposal." In re Payment Card., 330 F.R.D. at 28. This Opinion and Order addresses the latter prong first.

I. Whether the Court will likely be able to certify the class for purposes of judgment on the proposal

A court may certify a class for settlement purposes where the proposed settlement class meets the requirements for Rule 23(a) class certification, as well as one of the three subsections of Rule 23(b). In re Am. Int’l Crp., Inc. Sec. Litig., 689 F.3d 229, 238 (2d Cir. 2012). The Court will not yet be able to certify the settlement class under this standard for the following reasons.

A. Rule 23(a)

Rule 23(a)’s four threshold requirements are: (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of representation. Fed.R.Civ.P. 23(a). The Court has some concern with the fourth requirement.2

Rule 23(a) (4) requires that "the representative parties will fairly and adequately protect the interests of the class." Adequacy "entails inquiry as to whether: 1) plaintiff’s interests are antagonistic to the interest of other members of the class and 2) plaintiff’s attorneys are qualified, experienced and able to conduct this litigation." Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 60 (2d Cir. 2000). The second factor favors certifying the Proposed Class: Johnson’s attorneys, Joseph Jones and Benjamin Wolf, both have had extensive experience in consumer-protection and class-action litigation; they, combined, have been appointed as plaintiff’s counsel in hundreds of FDCPA cases and as class counsel in more than twenty-five cases. ECF No. 23-1.

However, the Court is not entirely convinced that Johnson’s interests would not be antagonistic to the interest of other members of the class. On the one hand, Johnson’s interest and the Proposed Class members’ interest are aligned with one another in that they all suffer from the same injury — the same defect in the letters Defendants sent out. Because of this injury, Johnson has an "interest in vigorously pursuing the claims of the class." Penney v. Deutsche Bank AG, 443 F.3d 253, 268 (2d Cir. 2006). On the other hand, their interests diverge with respect to splitting the settlement fund (whose size is effectively capped at a low figure). Under the proposed plan of distribution, out of the settlement fund totaling $28,500, $1,500 will be paid to Johnson, consisting of $1,000 reflecting the statutory cap for damages for a FDCPA violation if Johnson were to proceed individually, plus $500 as an incentive for

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being the class representative. 15 U.S.C. § 1692k(a)(2); Joint Memorandum of Law in Support of Motion for Preliminary Approval of Class Action Settlement, Certification of Conditional Settlement Class, and Approval of Class Notice, ECF No. 23-2 ("Joint Mem."), at 13. The balance of $27,000 will be divided, on a pro rata basis, among the class members who do not opt out. Joint Mem. 13. Given that the Proposed Class consists of 5,386 individuals, each member can receive as little as $5.01. The contrast between $1,000 and $5.01 - reflecting the view that Johnson can recover statutory maximum damages while other Proposed Class members cannot - shows divergence between Johnson’s interest and the other Proposed Class members’ interest.

Furthermore, defendants’ counsel conceded at oral argument that some class members, upon receiving the defective letters, paid what the letters demanded, while others did not. See Hearing Transcript, December 9, 2019. Those who paid may have stronger claims than those who did not, raising questions as to whether they should all be treated alike, thus raising an issue whether Johnson can adequately represent both groups.

  1. Rule 23(b)

In addition to finding that the class satisfies Rule 23(a), the Court must also determine whether the class meets the requirements of Rule 23(b)(1), (2), or (3). Here, Johnson seeks to certify the class under Rule 23(b)(3), which permits certification where "questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy."

Whether a class action is superior is an "explicitly comparative" inquiry, requiring the Court to consider alternatives to class settlement. In re Petrobras Securities, 862 F.3d 250, 268 (2d Cir. 2017). The Court is instructed to consider four nonexclusive factors in...

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1 practice notes
  • Geiss v. The Weinstein Company Holdings LLC, 072420 NYSDC, 17 Cv. 9554 (AKH)
    • United States
    • Federal Cases United States District Courts 2nd Circuit Southern District of New York
    • July 24, 2020
    ...Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974). See Johnson v. Rausch, Sturm, Israel, Enerson & Hornik, LLP, 333 F.R.D. 314, 320 (S.D.N.Y. 2019) (courts consider Rule 23(e)(2) factors together with Grinnell Numerous factors weigh against approval. F......
1 cases
  • Geiss v. The Weinstein Company Holdings LLC, 072420 NYSDC, 17 Cv. 9554 (AKH)
    • United States
    • Federal Cases United States District Courts 2nd Circuit Southern District of New York
    • July 24, 2020
    ...Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974). See Johnson v. Rausch, Sturm, Israel, Enerson & Hornik, LLP, 333 F.R.D. 314, 320 (S.D.N.Y. 2019) (courts consider Rule 23(e)(2) factors together with Grinnell Numerous factors weigh against approval. F......